Federal Deposit Insurance Corporation staff said Thursday that the agency’s Deposit Insurance Fund Reserve Ratio, which measures Deposit Insurance Fund (DIF) balances compared to all FDIC-insured deposits, has returned to the legal minimum level of 1.35% ahead of schedule. He said it is likely. .
FDIC Chairman Martin Gruenberg said, “Achieving the statutory minimum reserve requirement before the statutory deadline strengthens the deposit insurance fund, increases its resilience to unexpected losses, and increases the potential for procyclical rating increases. “It will be reduced.” “As of June 30, 2024, the Deposit Insurance Fund balance totaled $129 billion due to growth in DIF balances and slower than average insured deposit growth, and $7.5 billion from the previous update on December 31. increased.”
As the FDIC released its second semiannual update on DIF this year, FDIC officials said reserve ratios are likely to meet minimum required levels ahead of the September 30, 2028 deadline. . The increase in DIF balances combined with slower growth in insured deposits resulted in a 6 basis point increase in the reserve ratio from 1.15% at end-2023 to 1.21% at June 2024. Staff expect reserves to increase, despite uncertainties such as the possibility that other banks may fail or that guaranteed deposits may grow faster than expected. This ratio is most likely to reach the legal minimum in 2026.
The agency has overseen plans to replenish the DIF since the reserve ratio fell below the legal minimum of 1.35% during the 2020 pandemic. In 2023, a series of local bank failures resulted in regulators ultimately invoking the systemic risk exception for protection. Uninsured deposits in failed banks took an additional $19.6 billion hit to the fund, as of the agency’s latest estimates.
In early 2023, before the bank failure, the agency was already working on revised plans for 2022, increasing the initial base assessment rate by 2 basis points for all insured depository institutions starting January 1, 2023. This move was driven by predictions such as: There was a risk that the reserve requirement ratio would fall below the legal minimum by the September 30, 2028 deadline.
Insured deposits at FDIC-insured banks experienced their slowest growth over the past year since 2013. In June, the FDIC reported that insured deposits for FDIC-backed companies grew 0.8% year over year, 3.7% below the long-term average of 4.5. %. The agency attributes this decline in insured deposit growth to a decline in insured intermediary deposits, slower growth in mutual deposits compared to 2023, and overwhelmingly lower growth in other insured deposits. It is believed that this is the cause.
Looking ahead, the staff expects insured deposit growth to remain below historical norms in the near term.
Despite the positive signs from the FDIC backstop, FDIC officials said the industry continues to face headwinds in the credit space, particularly as long-term loan ratios rise in the consumer real estate and personal loan portfolios. He said he is doing so.
Funding and earnings pressures remain high, with net interest margins declining through the first half of 2024 and remaining below pre-pandemic levels. As noted in the FDIC’s latest Quarterly Banking Profile, the number of financial institutions the FDIC has identified as problematic is also increasing. Despite this increase, the proportion of problem banks in the total remains within normal non-crisis levels, according to authorities.
